Thousands of Disabled Veterans Forced to Repay Separation Pay, Despite Disability Compensation
A little-known federal law is forcing tens of thousands of disabled veterans to repay lucrative separation payouts they received when the military needed to downsize, even though they are simultaneously receiving disability compensation for injuries sustained in service. New data obtained by NBC News reveals the impact of this law, revealing that nearly 122,000 veterans have been forced to return payouts, some exceeding $30,000, over the last 12 years. This has left many struggling with financial hardship and highlighting the need for reform.
Key Takeaways:
- A federal law prohibits veterans from simultaneously receiving both disability compensation and special separation pay, a lump-sum incentive offered to service members when the military reduces its active-duty force.
- The U.S. Department of Veterans Affairs has recouped over $17,000 in separation pay from veterans in 2018, the highest annual figure to date.
- The PACT Act, enacted in 2022 to expand benefits for veterans exposed to toxic substances, has inadvertently brought this law into focus, increasing the number of recoupment cases as veterans file new claims.
- Veterans like Shawn Teller and Vernon Reffitt had received both benefits for years, only to be informed by the VA that they were ineligible. These cases illustrate the potential for costly errors in the VA’s administration.
- Advocates are pushing for reform to the law, arguing that it is unfair to link two separate benefits and creates hardship for veterans.
A Law Hidden in Plain Sight
The law, which dates back to the 1980s, is designed to prevent veterans from receiving double payments for a single service. However, this practice has quietly resulted in thousands of veterans facing financial hardship. Some, like Vernon Reffitt, have been told to repay $30,000 earned over 30 years ago. Others, like Shawn Teller, are faced with monthly disability payments being withheld to cover their separation pay, leaving them struggling to make ends meet.
The PACT Act Creates A Surge in Recoupments
While the VA claims that the number of recoupment cases is less than 1% of the total disability compensation recipients, the numbers have been steadily rising in recent years. The enactment of the PACT Act, which expanded benefits for veterans exposed to burn pits and other toxic substances, has coincided with a surge in recoupment cases. The VA received a record-breaking 2.3 million compensation claim applications in 2023, a 42% increase from the previous year.
However, the VA claims it is not actively seeking to increase recoupments. They argue that the increase is simply a natural consequence of the higher number of claims processed due to the PACT Act.
Errors and Oversights Plague the System
Several cases highlight the potential for error in the VA’s administration of the law. Teller and Reffitt, both of whom received both benefits for years, were only notified of their ineligibility when they filed PACT Act claims. This suggests that the VA may not be adequately identifying potential recoupment cases at the initial claim stage, resulting in years of unintended double payments followed by a sudden demand for repayment.
The VA defends its actions by stating that it is legally obligated to recover special separation benefits before veterans can receive disability payments. They also note that they are working to improve oversight by scanning veterans’ records into electronic files.
Waivers Remain A Rare Option, Leaving Veterans Uncertain
The law does allow for waivers of recoupment, but these are only available for voluntary separation pay and subject to strict standards. Even then, the process is opaque, and the standards are not clear, leaving veterans uncertain about their chances of success. The Air Force, for instance, has granted five waivers to veterans who were incorrectly informed that recoupment would be waived if they became eligible for disability compensation. However, this is far from a guarantee for other veterans facing similar circumstances.
A Call for Reform: Separating Benefits, Protecting Veterans
Advocates for veterans emphasize that the current law is unfair and needs immediate reform. They argue that the benefits should be considered separate, with disability compensation based on injuries sustained in service and separation pay based on years of military service.
"The two payments have nothing to do with each other," stated Marquis Barefield, an assistant national legislative director with DAV. "They are two separate buckets of money."
The current practice of linking these benefits forces veterans to choose between necessary disability payments and recouping separation pay, which often surpasses the amount of their monthly disability income.
Representative Ruben Gallego has introduced a bill to change the law, but progress has been slow, highlighting the need for heightened awareness and advocacy to protect veterans from this unforeseen financial burden.
The current situation underscores the need for a fairer and more transparent system that acknowledges the sacrifices veterans have made and ensures that they are not penalized for seeking the benefits they deserve.
